Economics Homework Seven Answers - Student Two

1. Many buyers and sellers. When there are a lot of buyers and sellers, it insures that all of the competitors are working hard to keep the people buying from them.

2. Goods that are perfect substitutes for each other. Goods that are perfect substitutes of each other are what allows for the market to have perfect competition. For example, there are tons of different brands of pencils, which makes the price of pencils extremely cheap, because there are so many substitutes it makes tons of choices for people.

3. Perfect knowledge in the market. The people buying from the sellers have to know who has the cheapest prices.

4. Perfect mobility of resources. If two of the same products are sold different prices, the lesser price is going to have more prices, thus it is not perfect competition.

Correct!

2. Describe how you might use competition, perhaps even competing with yourself, to motivate you to achieve more. When I see other people getting higher grades, it motivates me to think that I could be getting the same exact grades, if not better, if I only applied myself! Therefore, I am motivated to study more and push harder and, if not verbally, then mentally, compete with the others to do just as good or better then them.

Right.

3. We are going to have our midterm in two weeks. Think of a question that you would like to see answered or clarified at the next class.

So you'll be getting a 100%, right??? Ha ha ha. This is your "free pass question."

4. Do you think the converse of Gresham's Law is true with respect to speech and conversation, such that good speech or conversation (such as discussing the Bible) drives out bad? Explain. Absolutely! I know from personal experience this is completely true. A particular group of friends that I hang out with had "bad speech", and the more I hung out with them over the months, being with them yet not talking bad like them, they definitely realized that I didn't talk like that, and I have seen them over the months totally eliminate bad words from their vocabulary when around me. I didn't have to say anything to them, because just like the converse of Gresham's Law states, the good of my own conversation drove out the bad in theirs!

Superb, could be a model answer!

5. Explain the difference between total cost, average cost, and marginal cost. Total cost is all of the costs of something added together, whereas average cost is the sum of all the production costs divided by the number of units produced, and marginal cost is the cost of the additional inputs needed to produce that output.

Good, but entirely precise about marginal cost (MC). It is the cost of one additional unit. (Minus 1)

6. Suppose you decide you could profitably set the price for a homeschool dance at $15 per ticket, and it would have attracted 150 people. You also determine that 50 out of the 150 people who would have attended would have paid $20 per ticket and 10 out of the 150 would have paid $25 per ticket, and 5 out of the 150 would have paid $30 per ticket, because they would have enjoyed and benefited so much from it. However, the homeschool dance was never held because no one "got around to it." What is the loss in wealth or consumer surplus due to the fact that the event was not held? Consumer surplus: $15 x 150=$2,250, 50 x $20=$1,000, 10 x $25=$250, 5 x $30=$150=$3,650. So loss of consumer surplus would be $3,650.

No, not the first calculation in your series. There is no consumer surplus for those who would have paid only $15. They have no surplus; they got what they paid for, with no extra benefit. Also, you are using the total price rather than the surplus for the others. The consumer surplus is 50 x $5 + 10 x $10 + 5 x $15. (Minus 2).

7. Is there perfect competition between homeschooling and public schools? If not, explain the imperfections. Definitely not. In order for there to be perfect competition, one of the factors is "goods that are perfect substitutes for each other." In other words, the two things competing have to offer similar things. Public schools do not offer any where near as much good as homeschooling. One imperfection is the fact that in pubic school, kids are completely indoctrinated in non-christian, liberal ideas and cannot even voice their own opinions without expecting harsh criticism and rejection. On the opposite side of the spectrum, homeschoolers have the freedom to teach or learn whatever side of the argument they want, and are not rejected and criticized for having their own opinion. For example, evolution vs. creationism, pro-choice vs. pro-life, global warming/environmentalism vs. non-environmentalist viewpoint...and the list goes on! Another imperfection is the environment of public schools. With filthy things circulating constantly around you in speech, dress, attitude, and more, innocent children leaving the home for the first time, at ages as young as five years old, are being taught immoral life-styles by living in them all day every day five days a week. With homeschooling, though, the child is home constantly in a friendly, loving, family environment, where the parent can be sure their child is being brought up in an uplifting, wholesome environment.